Filed under: Strategic Management | Tags: books, Business, business books, Strategic Management
Who would have imagined that the arcane science of game theory could be used to predict the outcome of such common experiences as a game of “guess the number,” the CBS reality-series Survivor , or the answers to multiple choice questions on the GMAT.
These are just some of the examples used by authors Avinash Dixit and Barry Nalebuff in their effort to bring game theory into the mainstream in their latest book the Art of Strategy: A Game Theorists Guide to Success in Business and Life. This book is a follow-up to their very successful title Thinking Strategically, published in 1993. Although they originally were planning a revision to this earlier book, they ended up with an entirely new book, due to their own experiences in the interim and the wide-ranging applications of game theory in modern life.
As originally defined by the authors, game theory is the “art of outdoing an adversary, knowing that the adversary is trying to do the same to you.” But because of the maturing of their thinking, they have now added “It is also the art of finding ways to cooperate, even when others are motivated by self-interest, not benevolence. It is the art of convincing others, and even yourself, to do what you say and of putting yourself in others’ shoes so as to predict and influence what they will do.”
Game Theory was popularized (although we may not have known its name) by A Beautiful Mind, the biography and subsequent movie about John Nash, who received the Nobel Prize in Economics for work in game theory in 1994, along with John Harsanyi and Reinhard Selten. Though the term wasn’t being widely used at the time, game theory was also applied to business by Michael Porter in his book Competitive Strategy, which Soundview summarized back in 1981.
So the next time you’re trying to figure out the strategy of your favorite player in the latest reality show, or just playing a game of rock-paper-scissors, remember that you’re watching or using game theory. Perhaps you’ll want to pick up this book to improve your chances, or you can just wait for the Soundview Executive Book Summary of The Art of Strategy coming out in a few months.
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